Financial Challenge – Day 8 Appendix

This is a possible update for the Day 8 Financial Challenge where you compared insurance rates. I came across this post over at Retire at 30. Basically he said that while looking for car insurance, he first placed the minimum coverage levels into the quote systems thinking that this was what he currently had ($25,000 for personal, $50,000 for accident and $25,000 for property) for his auto insurance.

Later he found out that his coverage was actually higher than the minimum coverage ($100,000 for personal, $300,000 for accident and $100,000 for property) so he ran the numbers again. When he did, the insurance rates were less for the higher coverage than the minimum coverage. His theory is that people who have higher coverage are a lower risk according to the risk analysis studies and therefore receive a lower rate quote.

As soon as I read this I contacted Nate (who is also looking for less expensive auto insurance) and asked him to run the numbers to see if it was true. Unfortunately, when Nate ran his numbers, the higher coverage was more expensive than the lower coverage, but it was much closer than we had thought it would be (in some cases less than $50 difference).

Since we are all doing this to try and lower our current auto insurance, it would be wonderful if some people can get more insurance coverage for less money, but before I make this a permanent recommendation as part of the Financial Challenge Day 8, I want to get confirmation from someone else that they a quote for higher insurance coverage for less money. Please run the numbers and see – and be sure to let everyone know in the comments whether raising your coverage gets you a better rate or not. This should be an interesting experiment, especially if others can confirm this quirk to be true.